1. The
Appellant, Indore Development Authority (hereinafter referred to as the
'Development Authority') has been con- stituted under the provisions of the
M.P. Nagar Tatha Gram Nivesh Adhiniyam, 1973 (hereinafter referred to as 'the
Act'). The writ-petitioners/respondents (hereinafter referred to as 'the
respondents') are the intended, allottees of flats in the Navlakha Housing
Complex Scheme No.31 in the town of Indore, on hire-purchase basis.

2.It
appears that in the year 1977, an advertisement was issued by the Development
Authority, inviting applications from the persons interested in purchase of
flats in multi- storeyed buildings on hire-purchase basis. As per the said
advertisement, a deposit of Rs. 1,000/- for Lower Income Group (hereinafter
referred to as 'the LIG') residential flat and a deposit of Rs.2,000/- for
Middle Income Group (hereinafter referred to as 'the MIG') residential flat was
to be made. It was also said that the plinth area for the MIG Flat shall be 805
sq. ft. and that of the LIG flat shall be 500 sq.ft. It was further said that
at the time of the allotment of the flat a deposit of Rs. 11,000/- was to be
made by the hirepurchaser for the MIG flat and Rs.7500/for the LIG flat. The
rest of the amount was to be paid in instalments. Details of such instalments
were mentioned.

At the
foot, it was said that the cost of the flats aforesaid was based on estimate
and that the definite cost would be intimated at the time of allotment. The
estimated period for completion of the said scheme was mentioned as two years.

3.Pursuant
to the aforesaid offer made by the Development Authority, in 3 respect of MIG
and LIG flats, the respondents and others got themselves registered as
prospective hire-purchasers and made the prescribed deposits for the purpose of
the allotment of the flats. After a lapse of about two years, the Development
Authority by its letter dated 5. 11. 1979 intimated that according to the plan
approved for advance of loan by HUDCO (a financing institution) 162 MG flats of
plinth area of 750 sq.ft., 12 LIG flats of plinth area of 500 sq.ft. each would
be constructed in the four blocks from 3rd floor to 7th floor of the building
in the Navlakha Housing Scheme. The probable and estimated cost of MIG and LIG
flats were. given out at Rs.70,000/- and Rs.45,000/- respectively. There was
modification also in respect of payment of instalments, so far the cost of
flats on hire- purchase was concerned. He registration fee to be deposited was
also revised as Rs.5,000/- in place of Rs.2,000/ - for MIG flat and Rs.3,000/-
in place of Rs. 1,000/- in respect of LIG flat.

4.
Once again by letters dated 7.10.1980 and 25.10.1980 the respondents were
intimated that due to the increase in the prices of the materials the estimated
cost of LIG flats shall be Rs.60,000/- instead of Rs.45,000/- and that of the
MIG flats shall be Rs.95,000/- instead of Rs.70,000/-. It was said in the
communication that the revision had been made on basis of the prevailing market
rates of the construction materials. According to the respondents, they had no
option but to concede to the aforesaid arbitrary and unilateral demand made by
the Development Authority. By letters dated 261 A 984 and 26.12.1984, be
Development Authority again intimated to the respondents a further hike in the
cost of the flats. It was said that the cost of LIG flat had been raised to Rs.
1, 16,000/- and the cost of MIG flat had been raised to Rs. 1,30,000/-. In the
letter aforesaid dated 26.1.1984, respondents were informed that the area of
the LIG flat which had already been constructed was 714.94 sq.ft. in place of
500 sq.ft. as initially intimated in the year 1977. From the records, it
appears that the construction of the building had been completed in the year
1982 and the flats were ready for allotment. But possession could not be
delivered to the respondents because of a writ petition filed in respect of
alleged irregular allotments of 56 flats.

5.
After receipt of communication dated 26.1.1984 the respondents filed a writ
petition challenging the increase of the cost of flats registered by the
respondents. The stand of the Development Authority, before the High Court, was
that the price of the flats had to be raised because of the hike in the cost of
construction. In respect of LIG flats, yet another defence was taken, saying
that increase of the plinth area from 500 sq.ft. to 714.94 sq.ft. was also a
factor for the hike in the price of such LIG flats. The High Court allowed the
said writ petition on a Ending that the appellant Development Authority, had
been dealing with the respondents in an arbitrary and dictatorial manner. The
escalation of the cost at different stages amounting to more than 100% had not
been explained to the satisfaction of the Court. On that finding a direction
was given to the appellant to deliver the possession of the flats to the
respondents and other applicants on the-basis of the estimated cost conveyed to
the respondents and others by letters aforesaid issued in October 1980 i.e. so
far MIG flat is concerned at the rate of Rs.95,000/- and LIG flat at the rate
of Rs.60,000/-, within one month from the date of the order.

6. On
behalf of the appellant, it was 4 pointed out that at no stage the appellant
had made any commitment in respect of the final cost of the flats in question.
Since very beginning, they had given out only an estimated and probable cost of
the flats and they have kept the respondents informed from time to time about
the rise in the price of the flats, due to several intervening circumstances
including escalation of the cost of the construction materials. In this
connection, our attention was drawn to the advertisement and the application
for registration. The particulars which were issued in respect of the flats
aforesaid gave the details of the area in respect of Middle Income Group and
Lower Income Group.

After
the schedule for payment of different instalments, Note(1) said:

"The
above price is on estimated basis.

Definite
price will be intimated at the time of allotment. Persons receiving flats will
have to pay the service charges fixed. The probable period of completion of the
scheme is 2 years".

Reference
was also made to a communication dated S. II. 1979, addressed to the
respondents. It was said in the said communication that in Scheme No.31 Navlakha
Residential Complex, it had been proposed to build Higher/Middle/Lower income
groups houses by taking loan from HUDCO; - "according to scheme sanctioned
by 0 now 162 and 12 houses of 750 sq.ft. and 500 sq.ft. in four blocks from
third storey to seventh storey with provision of lift will be built whose
probable cost is expected to be respectively Rs.70,000/- and Rs.45,000/-".
Thereafter, the details of the payment to be made by the persons who had
registered themselves for allotment of the flats, according to the scheme sanctioned,
by the HUDCO was given out. In that communication, it was also said that if any
person wanted to have refund of the registration fee then the whole amount
would be refunded without interest. Thereafter the appellant issued the
communication aforesaid dated 7.10.1980 in continuation of its earlier
communication dated 5.11.1979 to all the respondents saying:

"The
Authority had in its earlier letter No.14039 dated 5.11.1979 indicated the
estimated cost of the above flat of Rs.45,000/-. But as you know the market
prices have increased very much. Due to draught causing scarcity of cement, the
scheme is delayed. Now the estimated cost of the flat at the current market
price has been estimate d at Rs.60,000/-".(emphasis supplied) Thereafter,
the details of the revised instalments which the respondents were required to
pay was mentioned. There is no dispute that pursuant to the said communication,
the respondents have paid from time to time. However, the communication dated
26.1.1984 aforesaid, which became the subject matter of controversy said:

"In
the above mentioned Navlakha Complex one MIG Flat was reserved in your name. In
this connection, you were given preliminary information by letter No. 14039
dated 5.11.79 about the amount of instalment based on probable cost and other
conditions.

Thereafter,
in continuation, the Authority by letter No. 1 1969 dt. 7.10.1980, informed you
for the reasons given in letter about the probable cost estimated at the time.
During this interval, increase in the price of various materials required in
construction, suggestion of Architect and use of the area under construction,
the area of each flat in- creased and that due to inevitable reasons, the
actual cost of the flat has 5 become Rs. 1,16,000 (in words Rupees one lac sixteen
thousand). On account of the above reasons the area of the flat has become 714.94
sq.ft. in place of 500 sq.ft." Thereafter, a request was made by the
appellant to the respondents to deposit the balance amount. A similar letter
was addressed to the persons, who had registered themselves for MIG flats
informing them that the area of the flat had become 808.12 sq.ft. and the
actual cost of the flat was Rs. 1,30,000/-.

7. It
may be mentioned that the respondents were given possession of the flats in the
year 1984 itself, on basis of the direction given by the High: Court. Since
then they arc in possessions thereof Because of that the appellant Development
Authority is claiming interest at the rate of 150 % from the respondents, since
the date they have taken possession of the flats, over the amount which are yet
to be paid by the respondents.

8.
During the last decade, it has become a common feature not only with the
private builders, but with the builders, including Development Authorities
which can be held to be a State within the meaning. of Article 12 of the
Constitution;

(1) to
escalate the price of the flats booked

(2) not
to deliver such flats according to the schedule mentioned in the advertisement
inviting applications. In this process certainly the victims are the citizens
who have booked such flats for shelter. The people belonging to the Lower
Income Group, having estimated the total amount, which they may have to pay for
the flats in question are on many occasions put to great strain and stress
because of the revision and escalation of the cost of such flats. But the
development authorities who construct such flats have their own story.

According
to them, under the existing circumstances it is very difficult, if not
impossible, to keep to the time schedule because of several intervening
factors, including litigations pending in courts from time to time. Then the
escalating price of the construction materials, labour charges etc. are the
other contributory factors.

9.
This Court in the case of Bareilly Development Authority v. Ajai Pal Singh,
(1989) 2 SCC 116, had to deal with a similar situation in connection with the Bareilly
Development Authority which had undertaken construction of dwelling units for
people belonging to different income groups styled as 'Lower Income Group','Middle
Income Group','Higher Income Group' and the 'Economically' Weaker Sections. The
respondents to the said appeal had registered themselves for allotment of the
flats in accordance with the terms and conditions contained in the brochure
issued by the Authority. Subsequently, the respondents of that appeal, received
notices from the Authority intimating the revised cost of the houses/flats and
the monthly instalment rates which were almost double of the cost and rate of instalments
initially stated in the General Information Table. But taking all facts and
circumstances into consideration, this -Court said that it cannot be held that
there was a misstatement or incorrect statement or any fraudulent concealment,
in the brochure published by the. Authority.

It was
also said that the respondents cannot be heard to say that the authority had
arbitrarily and unreasonably changed the terms and conditions of the brochure
to the prejudice of the respondents. In that connection, it was pointed out
that the most of the respondents had accepted the changed 6 and varied terms.
Thereafter they were not justified in seeking any direction from the Court to
allot such flats on the original terms and conditions. Recently, the same question
has been examined in the case of Delhi Development Authority V. Pushpendra
Kumar Jain, JT 1994 (6) SC 292. In respect of hike in the price of the flats,
it was said:- "Mere identification or selection of the allottee does not
clothe the person selected with a legal right to allotment at the price
prevailing on the date of drawal of lots. The scheme evolved by the appellant
does not say s o either expressly or by necessary implication.

On the
contrary, clause (14) thereof says that "the estimated prices mentioned in
the brochure are illustrative and are subject to revision/modification
depending upon the exi- gencies of lay out, cost of construction etc.

Although,
this Court has from time to time taking the special facts and circumstances of
the cases in question has upheld the excess charged by the development
authorities, over the cost initially announced as estimated cost, but it should
not be understood that this Court has held that such development authorities
have absolute right to hike the cost of flats, initially announced as
approximate or estimated cost for such flats. It is well known -that persons
be- longing to Middle and lower Income Groups, before registering themselves
for such flats, have to take their financial capacity into consideration and in
some cases it results into great hardship when the development authorities
announce an estimated or approximate cost and deliver the same at twice or
three of the said amount. The final cost should be proportionate to the
approximate or estimated cost mentioned in the offers or agreements With the
high rate of inflation, escalation of the' prices of construction materials and
labour charges, if the scheme is not ready within the time frame, then it is
not possible to deliver the flats or houses in question at the cost so
announced.

It
will be advisable that before offering the flats to the public such development
authorities should fix the estimated cost of the flats taking into
consideration the escalation of the cost during the period the scheme is to be
completed, In the instant case , the estimated cost for the LIG flat was given
out at Rs.45,000/-. But by the impugned communication, the appellant informed
the respondents that the actual cost of the flat shall be Rs. 1,16,000/- i.e.
the escalation is more than 100%. The High Court was justified in saying that
in such circumstances, the Authority owed a duty to explain and to satisfy the
Court, the reasons for such high escalation. We may add that this does not mean
that the High Court in such disputes, while exercising the writ jurisdiction,
has to examine every detail of the construction with reference to the cost
incurred. The High Court has to be satisfied on the materials on record that
the. authority has not acted in an arbitrary or erratic manner.

10.So
far the facts of the present case are concerned, it is an admitted position
that in the proforma attached to the application for registration, the
appellant said that the price mentioned by them was a probable and estimated
cost, the definite price shall be intimated at the time of the allotment.
Thereafter, the appellant had been informing the respondents and others who had
got themselves registered, from time to time regarding the escalation in the
cost of the flat. One of the reasons for the rise of the price for the LIG flat
7 from Rs. 60,000/- to Rs. 1,16,000/- appears to be the increase in the area of
the flat itself from 500 sq.ft. to 714.94 sq.ft. From 1982 to 1984, possession
of the flats could not be delivered because of the dispute pending in the Court
which-also contributed to the increase in the cost of the flat. Admittedly, the
respondents came in possession of the flats in the year 1984. In the facts and
circumstances of the case, we are satisfied that no interference was called for
by the High Court.' 11.We are informed that respondents have not paid the
balance amount as demanded by the appellant from them, be- cause of the pendency
of the writ application before the High Court and appeal before this Court. The
appellant has claimed the said amount with interest at the rate of 15% since
the date the possession was delivered, till the balance amount is paid. As the
respondents are in possession of the flats since 1984 without payment of any
rent to the appellant, they should not have any grievance in making payment of
the balance amount with interest. Still taking all facts and circumstances into
consideration, we direct the respondents to make payment of the balance amount
along with simple interest at the rate of 6% per annum from the date of
obtaining possession of the flat until payment.

12.Accordingly,
the appeal is allowed. However, in the facts and circumstances of the case,
there shall be no orders as to cost.